By Mike Colias
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 4, 2020).
General Motors Co. and Honda Motor Co. plan to jointly develop
new vehicles for North America through an alliance that would
deepen existing ties between two longtime rivals.
The companies said Thursday that the strategic alliance would
entail cooperation on everything from engineering the underlying
components of a vehicle to purchasing parts. The work could begin
next year, the car makers said, declining to estimate cost savings
or specify any future models that could be included.
Honda executive vice president Seiji Kuraishi said the company
hoped to achieve substantial cost savings in North America and
would maintain its own distinct offerings under the planned
partnership.
The two auto makers have signed a nonbinding memorandum of
understanding to form the alliance, but details on how exactly it
would operate and what aspects of the vehicles would be jointly
used on future models weren't released. A committee of leaders from
GM and Honda will manage the alliance, the companies said.
The plan would fortify the budding collaboration between the
American and Japanese auto makers, competitors in the lucrative
U.S. market that have nonetheless joined forces in recent years to
work on innovative technologies.
The companies in January revealed a co-developed, podlike
driverless shuttle, and Honda this spring said it would develop two
electric vehicles using GM's technology.
GM's stock closed down nearly 5% Thursday at $29.48 as the
broader market fell.
Global car companies face pressure to invest billions of dollars
on innovations such as electric and driverless cars, technologies
that are likely years from returning profits. At the same time,
they must continue to fund the core business of engineering and
building traditional vehicles, a capital-intensive endeavor with
relatively low profit margins.
Stricter auto-emissions regulations in places such as Europe and
China are only adding to the financial demands at a time when car
companies are still trying to navigate through a pandemic that has
plunged the car business into its worst sales slump in years.
The hefty cost burden has sparked a wave of new partnerships
within the auto industry in the past decade, particularly as
traditional manufacturers confront new Silicon Valley rivals with
deeper pockets.
Many of the recent partnerships center on future bets like
electric cars or car-sharing ventures. But more deals to share
engineering costs on traditional cars are likely as global sales
slow, analysts say.
"We can expect to see more such announcements as we come out of
the Covid-19 crisis and automotive companies survey a much-changed
business landscape," said David Leggett, an auto analyst at
research firm GlobalData.
There is plenty of precedent in the car business for companies
sharing the mechanical guts of a car -- the frame, axles, even the
engine and transmission -- while wrapping them in distinct exterior
styles with their own interior layouts and features.
Some Fiat Chrysler models still share much of their underlying
components with Mercedes-Benz parent Daimler AG, relics from the
failed merger between the companies. Toyota Motor Corp. and Subaru
Corp., a few years ago introduced twin sports cars, the Toyota 86
and Subaru BRZ.
GM and Toyota used a common set of components to build two
separate models at a shared plant in Fremont, California in the
early 2000s: GM's Pontiac Vibe and the Toyota Matrix. The factory
eventually was sold to electric-car maker Tesla Inc.
The proposed Honda-GM pact expands the companies' earlier
collaboration to the core parts of their businesses, areas such as
small and midsize sport-utility vehicles and passenger cars where
the companies have long competed in the U.S. The auto makers also
plan to work together on purchasing parts for their North American
operations, which could help them lower prices from suppliers.
The partnership eventually could lead to GM building Honda
vehicles at its factories, which could help GM absorb some of its
excess U.S. production capacity, people familiar with the talks
said. Joint manufacturing is part of the discussions, but nothing
has been decided, they said.
GM and Honda said their pact could lead to the companies working
together on research and development, including in areas of
advanced safety and connected-car technologies.
The two auto makers have complementary vehicle lineups, with GM
dominant in larger SUVs and pickup trucks, while Honda is strong in
smaller passenger cars and crossover SUVs.
Ford Motor Co. and Volkswagen AG this year completed plans to
jointly develop both electric and conventionally powered vehicles.
Ford will use VW's electric-vehicle technology for future models,
potentially helping the American auto maker meet Europe's
toughening emissions regulations. Under the deal, Ford will build
midsize pickup trucks and commercial vehicles for VW.
Fiat Chrysler Automobiles NV's pending merger with Peugeot's PSA
Group is aimed in part at sharing the cost of future technologies
and to leverage scale by combining two midsize global players.
Honda is roughly half the size of Japanese leader Toyota Motor
Corp. An effort to get bigger nearly a decade ago led to quality
problems, forcing a retreat.
Honda has been looking for partnerships to save money on
development. Like GM, it is pulling back from regions where it
believes it cannot be profitable. Last year, it said it would shut
plants in the U.K. and Turkey in 2021, and it plans to supply the
European market by exporting vehicles from Asia.
GM and Honda said their pact could lead to the companies working
together on research and development, including in areas of
advanced safety and connected-car technologies.
"This alliance will help both companies accelerate investment in
future mobility innovation by freeing up additional resources," GM
President Mark Reuss said.
--Peter Landers contributed to this article.
Write to Mike Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
September 04, 2020 02:47 ET (06:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
General Motors (NYSE:GM)
Historical Stock Chart
From Feb 2024 to Mar 2024
General Motors (NYSE:GM)
Historical Stock Chart
From Mar 2023 to Mar 2024